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The
sub-index on new orders fell to 48.5 in July — the lowest since
2023 — from 51.2 in June, while the sub-index for production
fell to 49.9 from 51.4.
PMI readings, based on surveys of factory managers, are measured
on a scale of 0 to 100. A reading above 50 indicates an
expansion, and below 50 reflects a contraction.
“The latest (PMI) reading remains an unpromising start to the
first wave of economic data for the second half of the year,”
Lynn Song, a chief economist for Greater China at ING Bank, said
in a commentary.
Weakness in domestic goods demand, including in building
activity, contributed to the lower PMI figures, according to
Capital Economics, while several typhoons that hit China in July
may have also disrupted manufacturing.
China’s economy has been under pressure from sluggishness in
domestic spending and investment, as a yearslong weakness in its
massive property sector hits consumer confidence. Fierce
competition for jobs has left workers worried over spending.
Robust exports, especially in technology-related products such
as semiconductors and electric vehicles, have helped boost its
overall growth momentum. But those are capital intensive
sectors.
The economy grew at its slowest annual pace in more than three
years in the April-June quarter, at 4.3%. That fell short of
China's official full-year growth target of 4.5% to 5%.
Countries including the U.S. have also complained about excess
industrial capacity in China from solar panels to autos and
supported by heavy state subsidies. They said that’s resulting
in China’s exports surge as its domestic demand slows, with its
cheap goods posing a threat to many economies.
Beijing has hit back at those claims.
But China’s economic model still favors productivity through its
policy preferences, said Gary Ng, a senior economist at French
bank Natixis.
Economists expect China to continue to rely on exports to
support its economic growth for the rest of the year.
Chinese leaders have also pledged to boost domestic consumption,
including at a meeting of the ruling Communist Party’s
decision-making Politburo on Thursday.
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